High-frequency indicators indicate that aggregate demand continued to grow albeit with a slower momentum than in the preceding quarters and painting a somewhat mixed picture, according to economic researchers at State Bank of India and Nomura.

“We track 50 leading indicators in consumption and demand, agriculture, industry, service and other indicators which indicate a dip in Q2 FY25. The percentage of indicators showing acceleration declined to 69 per cent in Q2 FY25 vs 80 per cent in Q2 FY24 and 78 per cent in Q1 FY25. Though we believe this is a temporary impasse only and the narrative might change completely in Q3 FY25 onwards,” SBI Research said in a report.

“The recent buoyancy in rural demand/consumption, juxtaposed against the somewhat declining urban demand/consumption, with 85 per cent of rural indicators showing acceleration as against 73 per cent of urban indicators (September 2024) could be indicative of shifting contours of urban demographics, marked preferences to Q-commerce (Quick Commerce; which is not being mapped properly) outweighing consumption decisions to some extents. Also, the much-needed regulatory tightening on unsecured lending and roadblocks hindering roll over / refinancing of debt through unsecured credit is punctuating the unwarranted exuberance built up post pandemic, more in urban ecosystem,” SBI said.

Nomura said the festive season paints a mixed picture for consumption. Demand is holding up in rural areas and tier-2/3 cities, but urban metros and industrial demand are weak. “We believe India’s economy has entered a cyclical growth slowdown. We see rising downside risks to our GDP growth projections of 6.7 per cent y-o-y in FY25 and 6.8 per cent in FY26, both of which are already below RBI projections (FY25: 7.2 per cent FY26: 7.1 per cent),” Nomura said.

According to Nomura, the data so far suggest that, while retail sales over the festive season have risen, the overall growth rates are slower than last year. Festive retail sales growth is slower for offline stores and higher for online e-commerce platforms, with the latter driven primarily by tier-2 and tier-3 cities.

Customers have an increased preference for financing their purchases. Demand for gold is lower in volume terms due to higher gold prices, and spot airfares have dropped due to subdued demand.

Two-wheeler sales have performed well, reflecting steady rural demand, while passenger vehicle sales are soft and driven by heavy discounting, while the continued contraction in medium and heavy commercial vehicle sales points to weak industrial activity.

Overall, demand is holding up in rural areas and in tier 2/3 cities, but urban metros and industrial demand are softening, Nomura said in a report

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